Real Estate Appraisal
six procedures for analyzing land or site value
1. Sales comparison 2. extraction (sale price - value of improvement) 3. allocation (ratio) 4. land residual technique (separate the rent, capitalize..) 5. ground rent capitalization 6. subdivision development analysis
MARKET ANALYSIS
1. demand studies 2. supply studies 3. marketability studies
FREEHOLD ESTATE
1. fee simple estate > fee simple absolute > fee simple defeasible > leased fee interest 2. life estate
IDENTIFICATION OF THE PROBLEM
1. identify CLIENT and INTENDED USER 2. identify the INTENDED USER 3. identify the PURPOSE of the assignment (type and definition of value) 4. identify the EFFECTIVE DATE of the opinion 5. identify the RELEVANT CHARACTERISTICS of the property 6. identify ASSIGNMENT CONDITIONS
HIGHEST AND BEST USE ANALYSIS
1. land as though vacant 2. ideal improvement 3. property as improved
DATA ANALYSIS
1. market analysis 2. highest and best use analysis
DATA COLLECTION AND PROPERTY DESCRIPTION
1. market area data 2. subject property data 3. comparable property data
elements of comparison
1. real property rights conveyed 2. financing terms 3. conditions of sale 4. expenditures made immediately after purchase 5. market conditions 6. location 7. physical characteristics 8. economic characteristics 9. use 10. non-realty components of value
APPLICATION OF THE APPROACHES TO VALUE
1. sales comparison approach 2. income capitalization approach 3. cost approach
Valuation process
A systematic procedure used in the valuation of real property
retrospective
A tax appeal assignment will commonly involve a ___ effective date.
party or issue
An appraiser must not advocate the cause or interest of any ____.
not misleading
Appraisers must develop and communication their work in a manner that is meaningful and _____ to their clients.
at completion of the assignment
At what point must an appraiser be competent regarding an appraisal assignment?
T/F? A fee arrangement contingent on an appraiser's value conclusion will help the appraiser to maintain impartiality and independence.
FALSE
T/F? In an assignment that involves a dispute between two parties, it is the appraiser's duty to represent his client's position.
FALSE
T/F? A series of errors in an appraisal is acceptable as long as it does not significantly affect the value conclusion
FALSE
portable hot tub permanently enclosed in a deck with underground plumbing
FIXTURE
room air conditioner permanently mounted in a wall opening
FIXTURE
F
the client and intended user are never the same
portable dish washer
PERSONAL PROPERTY
swimming pool above the ground
PERSONAL PROPERTY
chain link fence
REAL ESTATE
shrubbery
REAL ESTATE
swimming pool in the ground
REAL ESTATE
right to occupy
REAL PROPERT
an estate
REAL PROPERTY
condominium
REAL PROPERTY
Photographic printing equipment owned and used by a one-hour photo business that rents space in a mall
TRADE FIXTURE
air-handling systems and filters owned and installed by a tenant in lease space of an industrial park
TRADE FIXTURE
T/F? The unethical practices of a few can sometimes damage public trust for an entire profession.
TRUE
T/F? An appraiser must inform a client prior to accepting the assignment if he or she lacks the requisite knowledge and/ or experience to complete the assignment competently.
TRUE
credible
The appraiser must be prepared to demonstrate that the type and extent of research and analyses performed in the appraisal is sufficient to produce ____ assignment results.
ESTATE IN LAND
the degree, nature, or extent of interest that a person has in land
RESERVATION
a clause found in legal instruments and conveyances that creates a new right or interest on behalf of the grantor. while title passes to the grantee, some use or income is reserved for the grantor. reservations may include mineral rights, rental income, or easements.
REMAINDER INTEREST
a future interest held by someone other than the grantor entitling a person (remainderman) to an estate after a prior estate or interest has expired.
market analysis
a process for examining the demand for the supply of a property type and geographic market are for that property type.
F
a prospective appraisal has an effective date contemporaneous with the date of the report
Trend
a series of related changes brought about by a chain of causes and effects,. Trends are forecast through economic base analysis, statistical analysis, market analysis, and analysis of economic indicators and surveys.
Comparables
a shortened term for similar property sales, rentals, or operating expenses used for comparison in the valuation process. in best usage, the thing being compared should be specified, e.g., comparable sales, comparable properties, comparable rents.
valuation process
a systematic procedure appraisers can employ to provide the answer to a client's question about the value of property is called the ___.
VALUATION PROCESS
a systematic procedure used in the valuation of real property 1. identification of the problem 2. scope of work determination 3. data collection and property description 4. data analysis 5. land value opinion 6. application of the approaches to value 7. reconciliation of value indications and final opinion of value 8. report of defined value
nuances
an appraiser performing an assignment in an unfamiliar geographic location must spend sufficient time to understand the _____ of the local market.
FIXTURES
an article that was once personal property but has since been installed or attached to the land or building in a rather permanent manner so that it is regarded in law as part of the real estate
EASEMENT APPURTENANT
an easement having both dominant and servient estates. the easement interest passes with title to the dominant estate and continues to burden the servient estate
EASEMENT IN GROSS
an easement that benefits a legal person or entity (individual, corporation, partnership, LLC, government entity, etc.) and not a particular tract of land; an easement having a servient estate but no dominant estate
EMBLEMENTS
annual cops and plantings such as corn, wheat, and vegetables are know as emblements and are personal property
ENCUMBRANCE
any claim or liability that affects or limits the title to property. an encumbrance can affect the title such as a mortgage or other lien, or it can affect the physical condition of the property such as an easement. an encumbrance cannot prevent the transfer of possession, but it does remain after the transfer liens encumbrances
LICENSE
are NOT encumbrances revocable oral or written agreement grating privilege to use property not an estate or an interest in land not assignable and can't be sold a personal agreement usually granted for a specified period of time
TRADE FIXTURES
are articles placed in or attached to rented buildings by a tenant to help carry out the trade or business of the tenant are personal property
effective date
current/ retrospective/ propspective
specific data
details about the property being appraised, comparable sale and rental properties, and relevant local market characteristics.
T
develping and opinion of insurable value can be identified as the purpose of an appraisal assignment
income capitalization approach
direct capitalization yield capitalization
PARTIAL INTERESTS
divided or undivided rights in real estate that represent less than the whole
LEASEHOLD ESTATE
estates for years estate from period to period estate at will estate at sufferance
assignment conditions
extraordinary assumption/ hypothetical condition
PERSONAL PROPERTY
identifiable tangible objects that are considered by the general public as being personal. all tangible property that is not classified as real estate is also known as CHATTEL and PERSONALTY
T
identifying characteristics of the subject property is specific data rather than general data
LAND AS THOUGH VACANT OPTIONS
improve leave vacant
highest and best use
in ___ analysis, the appraiser analyzes the ideal improvement for the property.
SURFACE RIGHTS
include land, water, and anything attached to the land -- either naturally or placed by human hands
developement
intended use affects both appraisal ___ and reporting.
LEASED FEE INTEREST
is an ownership interest held by a landlord with the rights of use and occupancy conveyed by lease to others
improved land
is considered as being prepared for development by grading, draining, installing streets and utilities, etc.
REAL ESTATE
is land and all things that are a natural part of the land such as trees and minerals includes appurtenances all real estate improvements were once personal property; when attached to the land, they become real estate
FEE SIMPLE DEFEASIBLE
is subject to the occurrence or non-occurrence of a specific event two types： 1. qualified by a special limitation 2. subject to a condition subsequent
FEE SIMPLE ABSOLUTE
is the most complete form of ownership with unlimited duration and subject only to governmental powers
general data
items of information on value influences that derive from social, economic, governmental, and environmental forces and originate outside the property being appraised.
PROPERTY AS IMPROVED OPTIONS
leave as is alter demolish
LAND
the earth's surface, both land and water, and anything that is attached to it whether by the course of nature or human hands; all natural resources in their original state, e.g., mineral deposits, wildlife, timber, fish, water, coal deposits, soil.
APPRAISER
one who is expected to perform valuation services competently and in a manner that is independent, impartial, and objective
site
refers to an ai mproved parcel that dos not require further land development or subdivision.
LIFE ESTATE
rights of use, occupancy, and control, limited to the lifetime of a designated party. sometimes referred to as the life tenant
SUBSURFACE RIGHTS
rights to the use and profits of the underground portion of a designated property right to extract coal, minerals, oil, gas and water right to construct and maintain tunnels, subways, sewers and basements solid mineral rights oil and gas rights
T
scope of work is the type and extent of research and analyses in an appraisal or appraisal review assignment
APPURTENANCE
something added or appended to a property that then becomes an inherent part of the property; ... usually passes with the property when title is transferred
Intended user
the client and any other party as identified, by name or type, as users of the appraisal or appraisal review report by the appraiser on the basis of communication with the client at the time of the assignment
REAL PROPERTY
the interests, benefits, and rights inherent in the ownership of real estate
purpose of an appraisal
the objective of an assignment--e.g., in an appraisal assignment, to develop an opinion of the defined value of any real property interest.
Client
the party or parties who engage, by employment or contract, an appraiser in specific assignment
HIGHEST AND BEST USE
the reasonably probable and legal use of vacant land or an improved property that is physically possible, appropriately supported, financially feasible, and that results in the highest value. the four criteria the highest and best use must meet are LEGAL PERMISSIBLY, PHYSICAL POSSIBILITY, FINANCIAL FEASIBILITY, and MAXIMUM PRODUCTIVITY. Alternatively, the probable use of land or improved property - specific with respect to user and timing of the use - that is adequately supported and results in the highest present value.
identify
the relevant characteristics f a property are part of _____ the problem
EASEMENT
the right to use another's land for a stated purpose
scope of work
the type and extent of research and analyses in an appraisal or appraisal review assignment
intended use
the use or uses of an appraiser's reported appraisal or appraisal review assignment opinions and conclusions, as identified by the appraiser based on communication with the client at the time of the assignment
RIPARIAN RIGHTS
these are rights pertaining to properties touching a body of water or a waterway such as a river or stream (generally interpreted as flowing waters) with an emphasis on the benefit and useful purpose to which the flowing water may be applied.
LITTORAL RIGHTS
theses are rights pertaining to properties abutting an ocean, lake or pond (general interpreted as non-flowing waters) with an emphasis on the use and enjoyment of the shore (thee are between high and low water levels).
hypothetical conditions
this is a condition that is contrary to what exists but is supposed for the purpose of analysis.
extraordinary assumption
this is an assumption, directly related to a specific assignment, which, if found to be false, could alter the appraiser's opinions or conclusions
BUNDLE OF RIGHTS
total range of ownership interests in real property. an owner that possesses all the interests the bundle of rights has the most complete form of ownership 1. transfer 2. lease 3. mortgage 4. improve 5. possession
ENCROACHMENT
trespassing on the domain of another
unimproved land
typically considered to be raw land that may have development potential